Markets to consolidate before going up

With NSE Nifty soaring over 11,500 strike in the previous week ended March 22, 2019, the wider market index is expected to consolidate in the range of 11,500-11,600 levels before moving further upwards.

The Nifty 11,600 strike has recorded highest Call Open Interest (OI) addition. As per options data on NSE, the fresh Call writing at 11,600 strike points to a major resistance at this level for the week ahead.

Adding to this, the rollover cost for Nifty futures is quite high near 70 points and this may lead to short-term consolidation.

The Nifty 11,600 strike has highest OI of 3,858,300 Call contracts followed by 11,500 and 11,700 strikes. On the Put side, 11,000 strike is indicating highest OI of 3,822,150 contracts followed by 11,200 and 11,400 strikes.

Implied Volatility (IV) of Calls was down and closed at 14.45 per cent, while that for Put options closed at 14.57 per cent, observes Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd.

Volatility has remained around 16 level. Another round of Put option writing from lower levels should keep volatility lower. Nifty downsides should also be limited with fresh buying support expected to emerge on declines.

"The Nifty VIX for the week closed at 16.03 per cent and is expected to remain sideways. The PCR OI for the week closed at 1.60 indicating Put writing in recent rally," adds Bisht.

Market analysts say that buying support by FPIs in equities is expected to keep the resilience intact for the Nifty. However, 11,500 Call still remains highest for Nifty. Some more consolidation is expected around these levels.

The volume weighted average price (VWAP) of Nifty is near 11,300, which is the major volume centre of the index. ICICI Direct data indicates that in case of extended profit booking, the Nifty should find support near 11,300-11,350 for the March series banking stocks have remained the major driver for the Nifty so far.

BSE Sensex closed the week (March 22, 2019) at 38,164.61 points, a net gain of 140.29 points or 0.36 per cent against the previous week's closing of 38,024.32 points. NSE Nifty ended the week at 11,456.90 points adding 30.05 points or 0.26 per cent at 11,426.85 points in the previous week.

"On technical front, we believe that bullish momentum may continue towards 11,550 levels in coming sessions and every dip should be used as buying opportunity. The immediate support for Nifty is now placed at 11,400-11,350 mark," forecasts Bisht.

Bank Nifty

Bank Nifty closed the week at 29,582.50 points. Considering the huge cash buying by FPIs, market analysts expect that the buying interest may continue further in banking space.

Once the Bank Nifty manages to end above 30,000, more upsides can be seen in the days to come. According to ICICI Direct data, the 30,000 strike Call recorded major OI concentration. However, OI is well distributed in OTM Puts with highest addition in 29,300 strike.

The banking stocks witnessed continued buying spree during the week and this propelled the Bank Nifty towards a new life-time high by touching 30,000.

Outperformance was clearly visible as the index rallied by another 1,000 points along with a sharp rise in Open Interest indicating fresh long accumulation.

"Bank Nifty highest concentration on Call side is at 30,000, which is psychological level and tested on Friday session as well, moreover, Bank Nifty could not sustain above this level and corrected by almost one per cent in last session.

On the other hand, with 6.5 lakh Open Interest in 29,500 Put will act as immediate support followed by 29,000. On technical front the expected range for Bank Nifty spot for the week is 29,900 to 29,100," forecasts Bisht.

Private banks were leaders whereas sentimental boost was also provided by PSU banks, which rallied nearly 5.5 per cent.

Implied Volatility on the other hand, remained choppy towards the end of the week, which may attract some At The Money (ATM) Put writing in private banks in the expiry week.